Denver Water’s former rate structure, which had been in place for 20 years, was updated in 2016 to reflect current water-use habits and provide a buffer for more frequent extreme weather fluctuations. These weather fluctuations result in inconsistent revenue, making it harder to plan for and complete repairs and upgrades to our system. The new structure begins to shift our revenue from such a heavy reliance on usage to a more stable fixed fee over a few years, which means that future rate increases will be less subject to bigger jumps because of unpredictable weather.
In December 2015, the Denver Board of Water Commissioners adopted its 2016 budget, revenue requirements and rate structure to fund essential repairs and upgrades to Denver Water’s system. The new structure was designed to balance three objectives: affordability, conservation and revenue stability. The rate changes went into effect on April 1, 2016.
The rate changes will fund a number of multi-year projects, such as replacing aging pipes and failing underground storage tanks, upgrading water treatment facilities and rehabilitating Antero Dam in Park County.
Denver Water’s operational and capital projects are funded by water rates, bond sales, cash reserves, hydropower sales and fees for new service (system development charges). How the revenue increase impacts customer bills will vary depending upon customer water usage and whether the customer lives in Denver or is served by a suburban distributor under contract with Denver Water. Commercial, industrial and multifamily customers saw changes, too.
The rate structure for irrigation customers did not change in 2016.
What the rates and fixed monthly charge cover
Denver Water runs on revenue. We are not a tax-supported utility, and our charter prohibits operating for profit. The rule is simple: Charge rates that cover service costs.
The fixed monthly charge addresses the costs to collect, store, treat and deliver water, which are expenses that have to be paid regardless of the amount of water customers use every year. No matter how much water customers use, we still need to maintain and operate more than 3,000 miles of pipe, 19 reservoirs, 22 pump stations, 30 underground storage tanks, four treatment plants and much more. That makes it difficult to keep up with increasingly common revenue swings. To provide more revenue stability, we’ve raised the fixed monthly charge, accounting for meter size and the demands larger users have on the system.
Your water rates at work
Every dollar we make goes toward building and maintaining a system that will deliver high-quality water every day. Denver Water’s priorities for 2016 and the changes to the rate structure will allow us to continue improving our water system while ensuring essential water use remains affordable for our customers.
In 2016, Denver will spend $51 million on the water distribution system, including pipe replacement, rehabilitation and installation; pump station upgrades; treated water storage reservoir improvements; and vault upgrades.
Denver Water's continued commitment to conservation
Water conservation has been a cost-effective way to extend our supplies. Along with securing new supplies and reusing water, conservation will continue to be an essential part of our strategy to ensure we have an adequate water supply for everyone in the years to come. We can’t simply produce more water, so we will always have to use this precious resource efficiently — especially in our dry climate.